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The seller doesn't hold

CBS relents and finally discounts its fall upfront pricing, but damage is done 7/01/2001 08:00:00 PM Eastern

Cable's turn

Cable's turn

As the major broadcast networks were wrapping up their prime time upfront sales last week, agency executives were preparing to start talks on cable buys. It doesn't look pretty there, either.

Sources say agencies are looking for 15% to 20% price declines vs. last year. Cable ad sellers were said to be offering flat prices.

The cable upfront will probably take another couple of weeks to complete, in part because of the July 4 holiday.

Then it will be syndication's turn. Steep price declines are expected in that segment, as well.

At the CBS affiliate meeting last month, Viacom president Mel Karmazin called some of his station sales people "wimps" for selling advertising at lower rates than they otherwise might have.

But at the end of upfront, it was Karmazin who wimped out, granting the CBS network sales team the OK to do deals at rates below last year's prices—something Karmazin has been saying for months he would not do.

And in the process, according to buyers, CBS lost money to competitors. "We started pulling money from them," said John Lazarus, head of national broadcast buying at TN Media, New York. "CBS lost money because others were offering minus 8% and 9% in the pricing and with younger demos."

Lazarus and several other media buyers confirm that CBS was offering its ad-sales packages at prices that were 3% to 5% below last year's rates. "That's absolutely accurate," said Lazarus.

Earlier in the process, the network pondered offers from buyers at 1% to 2% below last year's prices, which Karmazin would not approve, sources said. The sales team, led by Joe Abruzzese, president, sales, CBS-TV, countered with flat rates, with the understanding that the network would throw additional inventory into the mix later in the year at no extra charge—a sort of backdoor way of offering discounts.

A few buyers reportedly accepted those offers, but most said no. "We got hard negative numbers from the other networks, and we weren't going to go back to our clients and have them ask us why we didn't get the same at CBS," said one buyer, who reported doing business with CBS in that 3% to 5% range.

But one source familiar with CBS' sales situation insisted that, when all the network's upfront deals are considered—especially the packages for Survivor, which total close to $225 million—CBS will show a cost-per-thousand increase that averages between 1% and 2%. Both Karmazin and Abruzzese declined requests for interviews to discuss the upfront.

By most accounts, this year's prime time upfront market totaled close to $7 billion, down about $1 billion, or 12.5%, from last year's market. ABC, CBS and NBC sold significantly less upfront inventory than last year because the money simply was not there to fill it. And the fourth quarter is particularly light—the sell-out rate across the networks is only about 57%—five to 10 percentage points below normal.

That doesn't bode well for CBS' strategy of making up sales ground in the scatter market, at least in the fourth quarter, when demand is expected to still be weak.

And the first quarter 2002 scatter market will have to compete with the Olympics. "Their first chance for recovery is the second and third quarters," said one senior-level media buyer.

CBS sold only 65% of its inventory upfront, compared with 83% last year. ABC sold about 72%, vs. 85% a year ago. NBC sold 67%, vs. 81%, and Fox sold 76%, vs. 78% a year ago. Fox normally sells a higher percentage of its inventory upfront than the other major networks.

NBC emerged as the top dog, raking in about $2 billion and a 29% share of the dollars. The network dropped about 10% in total dollars from last year (when it took in $2.2 billion) but increased its market share by about one percentage point.

"Our goal was to get the biggest piece of the pie, and we achieved that," said Randy Falco, president of NBC-TV. "You can't control how much money is in the marketplace."

As expected, ABC took the biggest revenue hit, dropping from $2.35 billion last year to $1.6 billion this year, down 30%, with price decreases in the 6% to 7% range. The big problem for ABC wasWho Wants to Be a Millionaire?, which dropped dramatically in the ratings, particularly among adults 18-49. And it was airing four nights a week, accounting for a big chunk of the schedule.

CBS has sold about $1.4 billion in business, down about 12% from a year ago,and roughly in line with what the network sold in the upfront in 1999.

The WB seemed to be the only network to get significant price increases—buyers confirmed the network's claim that it achieved 4% to 5% CPM hikes. Its total take was about $475 million, up 12% from a year ago.

UPN remained the only network not close to wrapping up its upfront by the end of last week. Part of the problem: Like co-owned CBS, it was holding out for price increases that buyers didn't want to pay. At press time last week, sources said UPN had sold about $60 million. Network sources said its goal is $180 million, vs. last year's $150 million.

But the buyers were playing tough with the network last week. With Buffy, for example, they were looking for discounts not only compared with what they paid The WB last year but also compared with UPN's Tuesday time period last year—in effect, close to a 50% rate decrease. "We're saying, 'No way, you can't do that to us,'" said one network insider.

2001 Upfront Scorecard
CPM change vs. 2000 % of inventory sold 2000 % of inventory sold 2001 Total sales
ABC -6% to -7% 85% 72% $1.6B
CBS -3% to -5% 83% 65% $1.4B
Fox -1% to -3% 78% 76% $1.3B
NBC -5% to -7% 81% 67% $2.0B
UPN 0% to +2% 58% 40%* $600M
The WB +4% to +5% NA NA $475M
*At deadline, UPN was in the middle of negotiations. NA=Not available
Source: Network and advertising agency executives

Cable's turn

Cable's turn

As the major broadcast networks were wrapping up their prime time upfront sales last week, agency executives were preparing to start talks on cable buys. It doesn't look pretty there, either.

Sources say agencies are looking for 15% to 20% price declines vs. last year. Cable ad sellers were said to be offering flat prices.

The cable upfront will probably take another couple of weeks to complete, in part because of the July 4 holiday.

Then it will be syndication's turn. Steep price declines are expected in that segment, as well.

March